2022 (2) TMI 680 - AT - Customs

Rejection of refund claim - finalization of provisional assessment or not - refund claim was rejected on the ground that the PD bonds executed had been finalized/cancelled - HELD THAT - It is clear that the exporter shall pay any fine or penalty, which is imposed in adjudication proceedings, if the Fe content is more than 63.99%. There is no dispute as regards the Fe content in the export consignment, from the report of the Chemical Examiner CRCL, Cochin, which showed Fe content to be less than 63.99% and which has been accepted by both the appellant as well as the Revenue. The liability to pay fine or penalty arises only when the Fe content is more than 63.99% but when it is proved that the Fe content was much below the threshold, naturally the PD bond will have no effect and the same stood cancelled. This is just the starting point, the same requires the finalization of the provisional assessments since the actual duty liability is involved and hence adjudication has to take place to determine the same. The requirement of law is that a provisional assessment, if treated as such, shall be treated as provisional for all practical purposes. The statute mandates the passing of the final assessment since a provisional assessment will have to be taken to its logical conclusion, by passing a final assessment order after obtaining necessary information or any report or any other document that the Officer may require, as prescribed under Section 18(1) ibid.It is also for the reason that a provisional assessment is in the nature of an interim order, which is not enforceable. Otherwise, granting of time as in Section 18(4) becomes otiose. Other than this, law does not recognize any deeming fiction to treat a provisional assessment as the final one. Hence, a provisional assessment will always remain as a provisional one. There is no shortcut as a deemed finalization since the authorities can only collect the tax/duty as permissible under law. Hence, the non-finalization of the provisional assessment has lead to a situation where the duty paid by the unsuspecting assessee has been retained in full without following the process of law since it is observed that a provisional assessment will not automatically become final but the same has to be taken to its logical conclusion by passing a final order. Appeals are allowed by way of remand to the adjudicating authority with a direction to pass a speaking order finalizing the assessment.

Summary

Issues:
- Refund of export duty based on discrepancies in moisture content and iron (Fe) content in exported iron ore fines/lumps.
- Validity of provisional duty bonds (PD) and their impact on the finalization of assessment.
- Interpretation of Customs Act, 1962 regarding provisional assessment and refund provisions.

Analysis:

Issue 1: Refund of export duty
The appellant, an exporter of iron ore fines/lumps, entered into a contract with overseas buyers requiring certain tests to determine iron and moisture content. Discrepancies arose when the foreign buyers reported higher moisture content than declared by the appellant, resulting in a downward revision of assessable value. The appellant sought a refund of excess export duty paid due to the higher declared value. Despite multiple appeals, the refund claim was rejected by lower authorities. The appellant argued that the excess payment was due to discrepancies in moisture content testing, leading to the rejection of their refund claim.

Issue 2: Validity of provisional duty bonds
The appellant was required to furnish provisional duty bonds (PD) to cover potential fines or penalties in case of discrepancies in iron content exceeding the allowable limit. The test reports indicated iron content below the threshold, rendering the PD bonds void. The lower authorities argued that the finalized/cancelled PD bonds equated to the finalization of assessment, leading to the rejection of the refund claim. However, the appellate tribunal disagreed, emphasizing that the provisional assessment must be finalized through adjudication to determine the actual duty liability.

Issue 3: Interpretation of Customs Act, 1962
The tribunal analyzed Section 18 of the Customs Act, 1962, which governs provisional assessment and refund provisions. It highlighted the requirement for final assessment after a provisional assessment, emphasizing that a provisional assessment remains provisional until finalized through a speaking order. The tribunal emphasized that a provisional assessment cannot be deemed final without due process, and the authorities must follow the law to collect tax/duty. The tribunal set aside the lower authorities' reasoning and directed the adjudicating authority to pass a speaking order finalizing the assessment based on correct values, ensuring consequential refunds to the appellant.

In conclusion, the appellate tribunal allowed the appeals by remanding the case to finalize the assessment based on accurate values and grant the appellant the appropriate refund. The judgment emphasized the importance of following due process under the Customs Act, 1962 in determining duty liabilities and refund claims.